This paper examines the impact of temporal variation in labour market institutions and other structural factors on unemployment in Europe. A system comprising a labour demand and a wage equation is estimated on pooled time-series data for the six largest EU countries for the 1980s and 1990s. The results suggest that changes in regional mismatch, trade union density and the ratio between consumer and producer prices are positively associated with structural unemployment. This result is robust to a wide variety of different specifications. No consistent role is found for other institutional factors (such as social security benefits, employment security and minimum wage). Copyright (c) Scottish Economic Society 2005.
This paper analyses the impact of employment security on labour demand. The approach taken is to estimate a dynamic labour demand function that allows for the effect of changes in a measure of employment security derived from surveys of employers. The estimation uses panel data on employment (both in terms of the total number of employees and total hours worked) for seven European countries for the period 1981-1994. The results suggest that employment security can have significant effects in slowing down the dynamic adjustment of labour demand. The paper also finds some (less robust) evidence that employment security can increase the long run level of labour demand in terms of total hours, but not the number of persons employed.
Disclaimer: This paper should not be reported as representing the views of the European Central Bank (ECB). The views expressed are those of the authors and do not necessarily reflect those of the ECB.
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